A Step in the Right Direction: State, Federal Cooperation on Export Promotion Has Helped Businesses
|Thursday, May 1, 2014 at 11:48 AM
By Wade Merritt, Vice President of the Maine International Trade Center,
President of the State International Development Organizations
The United Kingdom Minister for Trade recently proclaimed, “We’re going to save the world through exports!”
It may be a bold statement, but it is a sentiment and enthusiasm we should all share—the more export-ready our businesses are, the greater our share of a competitive global marketplace. Britain, like the rest of the trading world, is looking to recreate Germany’s export success.
Known as Mittelstand, medium-sized exporting companies are the backbone of the German economy. As we see increasing strength in the global economy, German companies are ideally placed to take advantage. The country currently enjoys record-high employment, a claim any American state would wear with pride.
Germany’s network of overseas representatives are deeply integrated with industry groups and government, which supports a shared understanding of the importance of small and medium-sized business exports. This shared mentality results in a coherent exporting strategy that has positioned Germany as a leading exporter for decades. In the United States, the recognition that sustained economic health is linked to global competitiveness exists; the next step is making small business international exports the core of states job creation strategies.
In their state of the state addresses this year, governors across the country focused on job creation, touting new foreign investment, new jobs and strategies to continue to create jobs. Governors highlighted the opportunity provided by increased engagement in foreign markets, demonstrating the significance of building a higher understanding of the world—a key demand of being globally competitive.
Given this increased focus on international markets, how is the United States faring?
In 2010, President Barack Obama launched the National Export Initiative with the aim of doubling exports by 2015. International exports have risen, however, the country is currently more than $200 billion below target. Oklahoma Gov. Mary Fallin recently pointed out that there are 30 million small and medium-sized businesses in the United States employing about half the private sector workforce, and only 10 percent of those businesses currently export. State trade offices say this is because small businesses aren’t as inclined to think internationally. But when they do, the return on investment is hugely impressive!
Exporting is an area where states have demonstrated great resourcefulness. Using federal matching grant funds made available through the State Trade and Export Promotion, known as STEP, program, some of the most impressive returns were seen by states that are not overall top exporting states.
Authorized by the Small Business Jobs Act of 2010, the STEP program is a three-year pilot program aimed at increasing the volume of international exports. In the first two years of STEP, the average grant award was about $600,000—ranging from $42,686 in Wyoming to more than $2.5 million in California in the first year, and from $32,127 in Wyoming to $2.35 million in Pennsylvania in the second year. On average, states saw a 20-to-1 return on investment.
In New Hampshire, one business saw its share of revenue from outside the United States grow by 10 percent after a STEP grant helped offset the cost of attending international trade conferences usually out of the reach of small businesses.
After receiving assistance to participate in a trade mission to Australia, one Pennsylvania company’s sales to that country rose 226 percent.
Looking at the success stories present in every state, it is hard to argue against the value of the STEP program.
In the current climate, however, states will have to do more with less in the third year of the STEP program.
The Consolidated Appropriations Act of 2014, a $1.1 trillion bill to fund the federal government to which Congress recently agreed, included $8 million in funding for a third year of the STEP program.
This is less than a third of funding appropriated in previous years. Despite the reduction, STEP’s inclusion in the federal spending bill is a victory for state international trade offices. Considering the program was not included in the president’s budget request last year, the program was saved by leaders in Congress who saw the value of STEP in their own states. Nineteen governors wrote to Congressional leaders detailing the success of STEP in their states.
The future of STEP is unclear. As a three-year pilot program, it is scheduled to expire this year, and whether it will be reauthorized by Congress remains uncertain, however measurable its success thus far.
Whether STEP is renewed, federal and state leaders will need to continue to think globally when creating an environment for small businesses to thrive. Continued cooperation is vital to ensure that American small businesses receive the technical assistance that our British or German competitors receive to be export ready and sustain their market presence.
In a country still recovering from a deep economic recession, it is the only smart way to move forward.
A TRANSATLANTIC PARNTERSHIP
FOR TOMORROW'S WORLD
By Vital Moreira, chair of European Parliament’s Committee on International Trade
The Transatlantic Trade and Investment Partnership represents an extraordinary opportunity to stimulate economic growth and job creation in both the European Union and the United States. Not only that, this ambitious venture has the potential to reshape our bilateral trade and investment relations and to develop global rules on trade for years to come.
There is, therefore, more at stake than just a regular free trade agreement. This 12-nation agreement with the trans-Pacific region and the European Union is expected to be a game changer.
The EU and the U.S. have the largest and the most integrated economic relationship in the world, but there is still great scope for exploiting its full potential. First of all, we still need to dismantle traditional tariff barriers and to make headway on market access issues in other areas, such as public procurement, services and investment. We already have very low tariff arrangements in place, but a number of tariff peaks remain.
Second, our main focus in the negotiations has to be to tackle the so-called “behind the border” barriers, such as differences in regulations, standards and certifications.
Third, we need to work together on developing global rules and standards in a number of areas where they do not exist or are insufficient. For example, sustainable development, customs and trade facilitation, competition and state-owned enterprises, raw materials and energy, small and medium-sized enterprises and transparency.
This partnership makes a lot of sense and both parties have a great deal to win with an ambitious trade and investment agreement, but negotiations will not be easy. As close as we are, some well-known differences of interests, of public visions and constitutional mismatches exist. Just take public procurement as an example: The EU will look for substantially enhanced access to the U.S. market, both at the federal and at state levels, as U.S. companies do not face the same level of market constraints at the state level in the EU.
Political decision-makers, stakeholders and the public in general need, first and foremost, to be aware of the huge benefits and opportunities offered by this agreement and then to commit themselves, throughout the negotiations, in order to reach a successful conclusion of the agreement. It is also important to remain realistic; not all regulatory divergences between the EU and the U.S. can be eliminated at a stroke. The partnership should be designed as a “living agreement” that will evolve over time into greater regulatory convergence.
The most sensitive issues around EU-U.S. trade talks and consultation with stakeholders, such as the one recently raised in the EU on investor-to-state dispute settlement, need to be addressed in an open and convincing way. Both sides have been clearly stating that the agreement is not about deregulation and it is not intended to lower levels of food safety or consumer protection. This means there will be no compromise whatsoever on the existing high levels of protection and that each side will maintain the right to regulate environmental, safety and health issues.
The Transatlantic Trade and Investment Partnership has a broader dimension than a normal free trade agreement and public support will be crucial to make this initiative a reality. The partnership is a two-way street, a give-and-take, but there are two things this agreement cannot change: our constitutions and the minds of our citizens. Sensitivities and differences, profound as they might be, should not get in the way of the big-picture benefits that will result from these negotiations.
Ultimately, with the Transatlantic Trade and Investment Partnership, we will work together for growth and jobs, as well as for asserting a common transatlantic leadership in tomorrow’s world.
Policy Area›Economics and Finance›Economic Development and Trade›International Trade and Development